As we close out 2021, the S&P 500 is going to finish with what looks like its fourth best year of returns since 2000. That could change if we see a drastic swing one way or another during these final two weeks over the holidays.
Typically this is the point of the year where we see the annual Santa Clause rally. Of late though we’ve seen a steep selloff of the high multiple growth stocks. The mega cap tech stocks continue to mask the overall losses and keep propping up the overall indices of the DOW, Nasdaq and S&P 500.
The strength of those mega cap tech stocks (Apple, Google, Amazon, Microsoft, Facebook, Tesla and Nvidia) will steer which direction the market as a whole goes as we kick off 2022. They have such a large weighting in the indices that their performances have such a dramatic impact to those overall returns. That’s how large these companies have become.
With investing the challenge is always looking forward. Going off past performance and returns doesn’t indicate anything about future returns.
With that in mind here are my three favorite stocks for 2022. I feel all three of these are undervalued and offer significant upside in 2022. I’m long all three of these stocks in my portfolio.
Disney (DIS)
This iconic franchise just keeps getting kicked while it’s down. It continues to get oversold because of worries about the pandemic. I feel that it’s significantly undervalued now at these levels. It’s become one of my larger positions.
The parks business is completely overlooked. The way the stock has reacted this year it’s as if that’s not even being priced into the stock. Those have not even fully rebounded yet. But in time they will. It’s traded entirely on Disney+ subscriber growth, which has slowed after the initial blastoff launch. The stock has been bouncing off its 52 week lows. YTD this stock is down 17%
There is significant spending coming of $33 billion on Disney+ content in 2022. When the parks roar back to full strength I think this stock will be in for a monster run.
And if you have kids, are you spending any less money on Disney related stuff? Odds are you’re probably spending more. An iconic franchise that is loved by people of all ages will eventually be back in favor with investors.
Amazon (AMZN)
Of all the mega cap tech stocks Amazon has been the laggard in 2021 by a lot. It missed on earnings the last two quarters, so the lagging relative to the other mega cap stocks is justified. It’s YTD performance has been 4%. It’s even trailed the S&P 500 and its 23% return.
I do not see that continuing in 2022. Of the 60 analysts that are tracked by Bloomberg that cover Amazon, they all maintained a buy rating on the stock. That can’t be said of Google, Apple, Microsoft or Facebook. It’s also maintained its position as one of the most held of all the mega cap stocks by hedge fund’s 13F filings.
With continuing the logistics and fulfillment center build outs combined with its thriving cloud business, I think this will be the leader amongst the mega cap stocks in 2022. I still believe same day delivery is getting very close and could give Amazon another boost. I’ve noticed our spending with Amazon has steadily risen. The speed, convenience and quality is really becoming unmatched.
Uber (UBER)
Uber has been a stock that just can’t get its footing. It’s struggled to get to profitability and has been tied to its rides coming off the pandemic. YTD its down 22%.
The good news is that the company is now very close to profitability. Uber has seen margins increase. The deep discounting of rides pricing has scaled back. This should lead to increasing margins and with the pickup in ride sharing as the economy gets back to normal levels. On Tuesday the CEO shared this on the state of it’s ride sharing.
CEO Dara Khosrowshahi said Uber just had its "best week ever in terms of overall gross bookings." "Our overall mobility business continues to get closer to pre-pandemic levels," Khosrowshahi said. "We're starting to inch up to call it like the 90% mark, we're not quite there. Last week was our best week, you know, post-pandemic."
Last month, CEO Dara Khosrowshahi bought $9 million worth of shares. That is something that fellow investors always like to see.
Moves I’ve Made
Shopify (SHOP): I continue to add to my position in Shopify. Bought more at the $1,300 level. The size of my position in Shopify is about where I want it to be. Continue to really love this stock’s long term outlook.
Airbnb (ABNB): With new COVID variant being discussed in the news, Airbnb continued its selloff. I feel that is overblown so I decided to add more shares at the $150 level. It may go even lower on the virus talk but I like this point and I bought more with an eye on the long term future of this company.
Coinbase (COIN): Coinbase is becoming quite a value at these current levels. I’m noticing more value based investors even buying shares in Coinbase. I found that rather interesting. This week it continued to selloff and I added at the $241 level. This continues to be how I plan to invest in crypto.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion.